Trinity Industries, Inc. (TRN): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

Trinity Industries, Inc. (NYSE:TRN) was in 24 hedge funds’ portfolio at the end of March. TRN shareholders have witnessed an increase in hedge fund interest of late. There were 16 hedge funds in our database with TRN holdings at the end of the previous quarter.

According to most market participants, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are greater than 8000 funds trading at the moment, we look at the crème de la crème of this group, about 450 funds. It is estimated that this group has its hands on the lion’s share of the smart money’s total capital, and by paying attention to their highest performing stock picks, we have found a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as important, positive insider trading activity is a second way to parse down the financial markets. There are plenty of motivations for a bullish insider to drop shares of his or her company, but only one, very simple reason why they would buy. Plenty of empirical studies have demonstrated the market-beating potential of this strategy if investors understand where to look (learn more here).

With these “truths” under our belt, we’re going to take a glance at the key action encompassing Trinity Industries, Inc. (NYSE:TRN).

How have hedgies been trading Trinity Industries, Inc. (NYSE:TRN)?

At the end of the first quarter, a total of 24 of the hedge funds we track were bullish in this stock, a change of 50% from the first quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully.

Of the funds we track, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in Trinity Industries, Inc. (NYSE:TRN). Citadel Investment Group has a $97.1 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $38.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, William Harnisch’s Peconic Partners LLC and Ric Dillon’s Diamond Hill Capital.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, created the largest position in Trinity Industries, Inc. (NYSE:TRN). First Pacific Advisors LLC had 36.6 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $16.1 million investment in the stock during the quarter. The other funds with new positions in the stock are John Fichthorn’s Dialectic Capital Management, Neil Chriss’s Hutchin Hill Capital, and Israel Englander’s Millennium Management.

Insider trading activity in Trinity Industries, Inc. (NYSE:TRN)

Insider trading activity, especially when it’s bullish, is particularly usable when the primary stock in question has seen transactions within the past half-year. Over the latest 180-day time period, Trinity Industries, Inc. (NYSE:TRN) has experienced zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Trinity Industries, Inc. (NYSE:TRN). These stocks are American Railcar Industries, Inc. (NASDAQ:ARII), Kansas City Southern (NYSE:KSU), Genesee & Wyoming Inc (NYSE:GWR), Westinghouse Air Brake Technologies Corp (NYSE:WAB), and Guangshen Railway Co. Ltd (ADR) (NYSE:GSH). This group of stocks are the members of the railroads industry and their market caps are closest to TRN’s market cap.

With the results demonstrated by our studies, retail investors should always monitor hedge fund and insider trading activity, and Trinity Industries, Inc. (NYSE:TRN) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds